RE: [EquisMetaStock Group] Re: adjusted moving averages & zero lag oscillators, MetaStock Email Archive

Preston,

On seeing your mail and reading the links, for a moment was sad somebody from my country had played an Indian Rope trick on the world but on investigation believe it not to be so - assuming that my understanding of the writing in one of the links to be that RMO & Rainbow has the same formula.

The following chart has both RMO, Rainbow Indicator (with parameters adjusted so that both RMO at the top in dark blue color & Rainbow at the bottom in green) and my earlier simple MACO of long & short periods is in maroon. Have taken the parameters of Rainbow (8 & 100) in such a way that they give crossovers more or less at the same point in time.

Formula I have used for Rainbow (modified) is as below;

n:=Input("Averaging Periods",1,40,8);

period:=Input("Period for Oscillator",50,200,100);

100 *
(CLOSE - ((Mov(C,n,S) +
Mov(Mov(C,n,S),n,S) +
Mov(Mov(Mov(C,n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S),n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S),n,S),n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(Mov(Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S),n,S),n,S),n,S),n,S),n,S) +
Mov(Mov(Mov(Mov(Mov(Mov(Mov(Mov(Mov(Mov(C,n,S),n,S),n,S),n,S),n,S),n,S),n,S),n,S),n,S),n,S)) / 10)) /
(HHV(C,period) - LLV(C,period))

For the same trending range (more or less), the RMO has behaved without any tick on the negative while the Rainbow has crossed below '0' a few times though for a single tick each time. But would have saved a trader from closing his position when filter is applied. The edges are ragged compared to the RMO - it has no relevance except for aesthetics.

But on both 'gap down' openings on 15th & 20th for NIFTY (Indian Index) the Rainbow carried on with the lag induced by that single tick while the RMO recovered pretty fast - especially on the 20th. The reason is that the 'incremental' fall suffered in that tick in the indicator for the 'gap down' in price was only minimal in RMO while it was considerable in Rainbow and also in the simpler MACO - exactly as one would expect with an oscillator that is purely based on 'price averaging & difference of 2 averaged points'. This behaviour of RMO is pretty advantageous to somebody when he/she is trading on smaller time frame systems like 5min / 15 min and intends to carry forward postions till either 'exit' or on 'stop & reverse' basis. This obviously avoids loss of profit and possibly a subsequent whipsaw.

I am no expert on software writing and can not crack his or anybodyelse's passwords. But I am still inclined to believe that in all probability he has based his system on MACO (it might even be the Rainbow - if so it has to be a further smoothened Rainbow at the final level since Rainbow has so much of raggedness at the edges) but there could probably be an element of a conventional oscillator built into it.

On the negative side his system does not seem to be swift enough at the extremes and fails to give sufficient divergence on the face of weakness which normally is the hallmark of a good oscillator (and the drawback of a MACO) but on the positive side it ignores the impact of a single large tick as in 'gaps'.

Unless somebody comes up with a set of parameters for Rainbow that exactly replicates RMO, guess it deserves the name Rahul Mohinder Oscillator and not Rainbow Modified Oscillator. :-)

As a matter of disclosure, I am as far away from Rahul Mohinder as West Coast is to East Coast in US.

----- Original Message -----

From: "Vasanth Mohan G Buddaan" <vgbudawn@xxxxnet>

To: <equismetastock@yahoogroups.com>

Sent: Wednesday, February 18, 2009 11:16 PM

Subject: Re: [EquisMetaStock Group] Re: adjusted movingaverages&zerolagoscillators

> Preston,
>
> thanks for the info on Rainbow Indicator.
>
> must say I am pretty appreciative of the work you are doing.
>
> have been learning a good amount of my programming from this group and great
> amount of info on so many other things.
>
> thanks again
>
>
> gv
>
> ----- Original Message -----
> From: "pumrysh" <no_reply@xxxxxxxxxxs.com>
> To: <equismetastock@yahoogroups.com>
> Sent: Wednesday, February 18, 2009 9:39 PM
> Subject: [EquisMetaStock Group] Re: adjusted moving averages &
> zerolagoscillators
>
>
>> GV,
>>
>> 1.Charts will be broadcast to those choosing to receive emails but
>> not saved in the message archive.
>>
>> 2.The RMO uses recursive smoothing.
>>
>> 3.While the indicator may not come with the flexibility of choosing
>> your own parameter, it can be modified.
>>
>> 4. The RMO is the Rainbow Indicator created by Mel Widner, Ph.D. and
>> originally introduced in the July 1997 issue of Technical Analysis of
>> Stocks and Commodities magazine.
>>
>> The Rainbow Charts indicator is trend-following indicator. The basis
>> of the Rainbow Charts indicator is a 2-period simple moving average.
>> Recursive smoothing is then applied to the original moving average
>> thereby creating 9 additional moving averages; each new moving
>> average is based on the previous moving average. Through this use of
>> recursive smoothing a full spectrum of trends is created that, when
>> plotted using continuous colors, have the appearance of a rainbow.
>>
>> The Rainbow Oscillator is also a trend-following indicator that is
>> based on the same calculations used to create the Rainbow Charts. The
>> Rainbow Oscillator is derived from a consensus of the Rainbow Charts
>> trends. It defines the highest high and lowest low of those moving
>> averages to create an oscillator and bandwidth lines based on those
>> calculations.
>>
>>
>> Click on the link for the Meatastock formula:
>>
>> http://www.traders.com/Documentation/FEEDbk_docs/Archive/0797/tradetips.html
>>
>> or go to:
>>
>> http://www.paritech.com/education/technical/custom/indicators/97jul.asp
>>
>>
>> The article link is:
>>
>> http://www.traders.com/Documentation/FEEDbk_docs/Archive/0797/0797Widner.html
>>
>> Discussion at the Equis Forum:
>>
>> http://forum.equis.com/forums/post/23170.aspx
>>
>>
>>
>> Hope this helps,
>>
>>
>> Preston

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